Operations

Would you know if a project was heading off the rails? Too often, members of project teams are crossing their fingers and providing only the most hopeful updates. After reviewing 14 studies into the ways in which individuals report (and misreport) the status of information technology or software projects, the authors identified five specific areas for leaders to look out for to avoid being blindsided.

In today’s global economy, there aren’t many large companies that can afford to ignore China in their plans for growth. The Summer 2014 issue of MIT Sloan Management Review features a special report on China, with insights about how to learn from China, what the future may hold for the Chinese economy — and how to do business in China despite the challenges of protecting intellectual property there.

China is becoming the best place to learn how to make ideas commercially viable, even as many multinational companies are growing increasingly wary of doing business there because of concerns about unfair competition and theft of intellectual property. Chinese companies excel at cost reduction, accelerated product development and networked production — and know how to assess what they can do and quickly find partners to fill the gaps.

“By operating in China, overseas businesses expose their intellectual property to risk,” write Andreas Schotter (Ivey Business School at Western University) and Mary Teagarden (Thunderbird School of Global Management). “But deciding to stay away entails the even greater risk of missing opportunities to acquire knowledge that is critical for competitiveness across a wide range of global markets.” To protect their IP, companies need to control and manage their IP vulnerabilities proactively.

“Lean” programs help many manufacturers boost productivity. But misplaced expectations of how quickly these programs can improve performance can make their implementation difficult. Better understanding of the rates at which lean programs produce improvements would make implementation go more smoothly — and lead to more increases in productivity. Managers should set targets that are appropriate to specific plants and be careful not to derail progress by using initial gains to lay off workers.

The UN’s Global Compact report identifies auditing the supply chain as the biggest obstacle to putting sustainability principle into practice. Companies simply don’t have enough information about suppliers’ sustainability practices to determine which links on the supply chain will provide the best outcome. But as global data sources become more all-encompassing — and companies’ analytics capabilities grow more sophisticated — that is changing.

The way health care is billed in the U.S. system is part of the reason costs are so high. WellPoint*, one of the largest providers of health care benefits and insurance in the U.S., is using analytics to change its provider payment system. The goal: promote a health care system based on value, not the volume of services. This Data & Analytics Case Study takes an in-depth look at how WellPoint went from idea to implementation, working with physicians and IT staff to build its Enhanced Personal Health Care program.

Chinese companies are opening up a new front in global competition. It centers on what the authors call accelerated innovation — that is, reengineering research and development and innovation processes to make new product development dramatically faster and less costly. The new emphasis is unlikely to generate stunning technological breakthroughs, but it allows Chinese competitors to reduce the time it takes to bring innovative products and services to mainstream markets. It also represents a different way of deploying Chinese cost and volume advantages in global competition.

It is becoming more and more commonplace for companies to take human rights into account when sourcing materials or manufacturing processes. Guest blogger Olivier Jaeggi of ECOFACT explains why this trend has significance for sustainability — and how corporate standards are increasingly taking the position that paying attention to human rights is a necessity for companies’ risk management strategy, rather than an act of good will.

Accepting five inconvenient truths about project status reporting can greatly reduce the chance of being blindsided by unpleasant surprises. For instance, many employees tend to put a positive spin on anything they report to senior management. And when employees do report bad news, senior executives often ignore it. Overconfidence is an occupational hazard in the executive suite, and executives need to examine their own assumptions and beliefs about project status reporting.

Research suggests that productivity improvements can have counterproductive results in a service business. Productivity gains are not always easy to make without sacrificing perceptions of quality, and unlike on the assembly line, increased productivity may not always lead to increased profitability. Instead, in a service business, productivity must be treated as a strategic decision variable.

Most managers know that they should protect their supply chains from serious and costly disruptions — but comparatively few take action. The dilemma is that solutions to reduce risk mean little unless they are evaluated against their impact on cost efficiency. To protect their supply chains from major disruptions, companies can build resilience by segmenting or regionalizing supply chains, and limit losses in performance by avoiding too much centralization of resources.

There are usually no winners in price wars. But under the right circumstances, it’s possible to win a price war by leveraging a specific set of strategic capabilities. These include the ability to read how things are changing, the skills to analyze data to identify trends and opportunities and the wherewithal to implement organizational changes both internally and across the value chain. Albert Heijn, a Dutch grocer, started and won a price war through its strategic capabilities and skills.

Companies have tried for decades to improve customer complaint resolution — without notable success. Customer expectations are rising; customers now expect positive results and not just the chance to complain. Many customers want nonmonetary remedies, such as an apology or a chance to vent. In addition, companies must recognize that they must treat every customer interaction as if it were playing out on a Facebook page or a YouTube video, because it might be.

No company can last for long without satisfied customers. But misguided attempts to improve satisfaction can damage a company’s financial health. Research finds that the relationship between customer satisfaction and customer spending behavior is very weak, and that the return on investments in increasing customer satisfaction is often trivial or even negative. What matters is how customers rank your brand in satisfaction relative to your competitors.

It’s easy to say customer satisfaction is very important – but harder to put that into practice. The Spring 2014 issue of MIT Sloan Management Review features a special report on understanding your customers, from gauging global clients’ satisfaction through the use of big data to figuring out better strategies for improving customer complaint resolution.